The Energy Union is still attractive for Poland

Within the EU negotiations concerning the introduction of even more demanding standards for CO2 reduction are underway together with the promotion of renewable energy sources and increased energy efficiency.
The Energy Union is still attractive for Poland

(©Shutterstock)

The project of the Energy Union was launched as the initiative of Poland. It was submitted in the new reality existing after the Russian aggression against Ukraine and the new disruptions in the supplies of natural gas. It was later influenced by the discussion about the European Union’s climate policy. It has changed and continues to change over time. The current shape of the project, which was partly born in Poland, is quite remote from the original intentions of the Polish authors, but many of its proposals  have been retained.

The construction of a European energy community was proposed on May 2010 by the President of the European Parliament Jerzy Buzek and the former head of the European Commission Jacques Delors. In response to the Ukraine crisis in March 2014, Poland proposed six elements of the Energy Union:

  1. Creating an effective solidarity mechanism to be used in the event of gas supply crises;
  2. Increasing EU funding for the construction of infrastructure providing energy solidarity, particularly in the eastern territories of the EU – up to 75 per cent of the value of projects;
  3. Joint purchases;
  4. Rehabilitation of coal as a source of energy;
  5. Shale gas extraction;
  6. Radical diversification of gas supplies to the EU.

At the same time, the then-European Commissioner for Energy Günter Oettinger announced a reform of the European Energy Community. It was supposed to go back to the main scope of its activity, that is, integrating the markets for electricity and gas. The postulates concerning energy security were strengthened by the growing tensions in the East accompanying the developments in the Russian aggression in Ukraine. The objectives of strengthening energy security through the creation of stronger solidarity mechanisms and better coordination of energy policy were in line with Poland’s goals.

At the stage of consultations of the intra-EU institutions, Polish ideas from 2014 have been either softened or discarded. The concept was eventually built on five pillars:

  1. Security of supplies based on the principles of solidarity and trust;
  2. Competitive and completed internal energy market;
  3. Reduction of the energy demand;
  4. Decarbonization of the EU’s energy mix;
  5. Research and development.

The most controversial demands, such as the rehabilitation of coal or the promotion of shale gas, have disappeared. Others have been translated into more specific ideas, but at the same time softened. It turned out that – as the Polish authorities later assessed – the energy union began to increasingly resemble an energy and climate union, while the energy security component, which was a priority for the Poles, was supplemented with environmental elements – seen as dangerous from the point of view of the interests of the Polish energy sector.

Eventually, the Polish government led by then-PM Beata Szydło managed to defend some of the original proposals. Investment in the concept of the energy union resulted in a revision of the security of supply regulation (SoS). It introduces a requirement for countries to maintain stocks of hydrocarbons and a solidarity mechanism between the member states regarding the use of these resources in the event of a crisis. The revision allowed for the creation of emergency corridors with reservations satisfying countries that had a skeptical approach to the strengthening of solidarity. It turned out that under a new government Poland found itself in their camp.

The next regulation promoted by Poland concerns the rules for the conclusion of intergovernmental agreements in the energy sector (IGA). Poland managed to defend the proposal that the European Commission should have the right to check any documents of this kind before they are concluded (ex ante). This will enable Brussels to support the member states in the negotiations. We can find proof in history that such support is sometimes necessary. In 2010, thanks to the intervention of the European Commission, it was possible to change the proposed gas contract between Poland and Russia and make it less unfavorable for Poland. Although the document remains confidential, despite appeals of the Supreme Audit Office for its disclosure, it is known that its duration was shortened and the purchased volume was reduced. However, there are still voices criticizing this agreement, which prolongs Poland’s dependence on Russia, even though it was  supposed to stop being dependent on that supplier.

Although the achievements in the European arena could be seen as satisfactory for Poland, and constitute a joint success of Polish politicians in Warsaw and in Brussels, the course of developments concerning the energy union has curbed their enthusiasm for the execution of this concept.

The inclusion and the increased importance of proposals from the scope of climate policy should be diagnosed, as well as the marginalization of proposals from the area of energy security. The result of lobbying in Brussels is so far unfavorable for Poland. The European Commission designated 2016 as the period of implementation of this project’s objectives, which were described once again in a document entitled “Clean energy for all Europeans”. This was the conclusion of attempts to include goals related to climate policy in the energy union. These involve, among other things, decarbonization, i.e. the elimination of CO2 emissions, as well as the promotion of renewable energy sources (RES) and energy efficiency. In addition, the concept was extended beyond the energy sector, and now it also applies to the construction industry, transportation, and the digital and financial sectors. It is referred to by some as the fourth energy package, due to the magnitude of its impact on economic activity in Europe. From the Polish point of view, this is a threat to the states’ freedom to conduct an energy policy based on domestic sources of energy generation, i.e. coal, which is predominant in the Polish energy mix.

One example of this could be the BREF emissions level standards, which will force the energy sector to pursue modernization, which according to the Ministry of the Environment could cost up to EUR2.4bn. Meanwhile, the adaptation of conventional power blocks to the environmental standards set in the BAT conclusions will cost Polska Grupa Energetyczna (Polish Energy Group) EUR431m. The company Tauron estimates its costs at less than EUR240m, while Enea will have to spend EUR120m.

We are now approaching a new period of implementation of the energy and climate policy, and negotiations are underway concerning the introduction of even more demanding standards for CO2 reduction, promotion of renewable energy sources and increased energy efficiency. The energy union is currently mainly used to encourage countries to raise their ambitions in this area. The objectives from the area of the energy security are implemented in a manner that doesn’t satisfy Poland’s interest. The Nord Stream 2 project, which could hinder the competitiveness of the LNG terminal in Świnoujście (built at the cost of billions of EUR) cannot be blocked by the European Commission, which is instead proposing negotiations with Russia. The anti-trust investigation concerning Gazprom’s abuses hasn’t been completed in Poland either. Meanwhile the Russian company received the green light to send more gas through Germany pursuant to the European Commission’s decision on OPAL, which Poland has to challenge in the courts. This doesn’t allow for optimism in the assessment of the energy union.

Poland shouldn’t give up before the game is over, however. The possible isolation of Poland in the conduct of the EU’s energy policy could lead to the strengthening of a multiple-speed Europe also in the gas sector, which is so important for Poland. Poland is also pursuing unilateral measures to secure the supplies of fuels. One example of that could be the project of the Northern Gate, i.e. the expansion of the LNG terminal in Świnoujście and the construction of a gas pipeline from Norway (Baltic Pipe). These are supposed to put an end to the dependence of Poland and the entire region of Central and Eastern Europe on gas from Russia by providing new sources of supplies, and not only new supply routes.

In order to achieve such ambitious ventures, we need the protective umbrella of the European Commission, and the support of EU funds. The fact that Brussels is still indispensable could be proved by the fact that the concept of a regional mechanism for the strengthening of European integration presented by the Polish President Andrzej Duda and known as the Three Seas Initiative was immediately met with a proposal for the establishment of an EU fund for the implementation of the group’s strategic projects. The initiative was joined by Austria, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. The EU will also be needed for a review of the situation in Central and Southeast Europe, which has been affected by Gazprom’s abuses identified in the course of the European Commission’s anti-trust investigation. For this reason, it is necessary to maintain the dialogue within the European Union.

The Energy Union has been transformed from a Polish project designed to protect the security of supplies into yet another tool for the implementation of the energy and climate policy, including elements contested by Poland. Despite this, it is still an attractive initiative. Perhaps under new conditions this concept could take a shape closer to Polish intentions.

Maintaining a position in the discussion on this topic ensures that when such an opportunity arises, Poland will be able to seize it. What has already been achieved, such as the painstakingly worked out provisions concerning the IGA and the SOS, is a success anyway.

Wojciech Jakóbik is an analyst of the energy sector.

(©Shutterstock)

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